1.1. Background of The Study: Impact of Political Environment On International Trade in Bangladesh
1.1. Background of The Study: Impact of Political Environment On International Trade in Bangladesh
1.1. Background of The Study: Impact of Political Environment On International Trade in Bangladesh
1. Introduction
Trading globally gives consumers and countries the opportunity to be exposed to
goods and services not available in their own countries. Almost every kind of
product can be found on the international market: food, clothes, spare parts, oil,
jewelry, stocks, currencies, and water. Services are also traded: tourism, banking,
consulting and transportation. International trade gives rise to a world economy, in
which prices, or supply and demand, affect and are affected by global events.
Political change in Asia, for example, could result in an increase in the cost of
labor, thereby increasing the manufacturing costs for an American sneaker
company based in Malaysia, which would then result in an increase in the price
that you have to pay to buy the tennis shoes at your local mall. A decrease in the
cost of labor, on the other hand, would result in you having to pay less for your
new shoes. The policies made by the government have a significant impact on any
company’s international market.
Page 1 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
often result in changes in policy and attitudes towards foreign business. Bearing in
mind that a foreign company operates in a host country at the discretion of the
government concerned, the government can either encourage foreign activities by
offering attractive opportunities for investment and trade, or discourage its
activities by imposing restrictions such as import quotas, etc. An exporter that is
continuously aware of shifts in government attitude will be able to adapt export
marketing strategies accordingly.
Nearly all governments today play active roles in their countries' economies.
Although evident to a greater or lesser extent in most countries, government
ownership of economic activities is still prevalent in the former centrally planned
economies, as well as in certain developing countries which lack a sufficiently
well-developed private sector to support a free market system.
That’s why we have conducted such study on the impact of political environment
on international trade in Bangladesh.
Page 2 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Basically the impact of international trade is the main focus of our study. Beside
this, we found related topic and issues with the international trade & political
environment is also involved in the scope of the study. The political environment
on International trade influence the GDP growth , inflation rate of a country,
economic imbalance in the income of poor & rich person , unethical work of
person etc.. All of these issues can build or destroy a country.
So, the negative influence will be the remarkable in our study & how we can
overcome from it, we will discuss about it in our term paper. Recognizing the
limitation we have faced and the need to understand further issues related to
combating politics in international business we designed a detailed paper based on
survey which sought to examine.
1. The type of and extent to which politics practices and activities have been
applied by businesses.
2. The factors and drivers influencing the approaches and attitudes of these
stakeholders to combating politics;
3. How, if at all, social awareness & other related precaution could be applied for
the purpose of combating politics.
Page 3 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Not available access to the journal to get the views of the scholar.
Survey has been conducted on student where it will be better to conduct the
survey on international businessman.
The area on this term paper is very big but we had to finish the work within
a very short phase.
Page 4 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
1. Literature review
a. Political environment
The political environment is the state, government and its institutions and
legislations and the public and private stakeholders who operate and interact with
or influence that system. It is basically the government actions which affect the
operations of a company or business. These actions may be on local, regional,
national or international level. Business owners and managers pay close attention
to the political environment to gauge how government actions will affect their
company.
Page 5 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
2. International trade
“Any business transaction between parties from more than one country is part of
international business”
“The exchange of goods and services between one country and another is called
International trade.”
Page 6 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Businesses should care about the different political systems around the world.
Despite the globalization of business, firms must abide by the local rules and
regulations of the countries in which they operate. We know how US-based
Google had to deal with the Chinese government’s restrictions on the freedom of
speech in order to do business in China. China’s different set of political and legal
guidelines made Google choose to discontinue its mainland Chinese version of its
site and direct mainland Chinese users to a Hong Kong version. Until recently,
governments were able to directly enforce the rules and regulations based on their
political philosophies. The Internet has started to change this, as sellers and buyers
have easier access to each other. Nevertheless, countries still have the ability to
regulate or strong-arm companies into abiding by their rules and regulations. As a
result, global businesses monitor and evaluate the political climate of countries in
which they currently operate or hope to operate in the future. Governments have
long intervention in international trade through a variety of mechanisms. At first
we discuss some of the reasons behind these interventions.
Page 7 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
1) Tariffs
2) Subsidies
Page 8 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Import quotas and voluntary export restraints (VER) are two strategies
to limit the amount of imports into a country. The importing
government directs import quotas, while VER are imposed at the
discretion of the exporting nation in conjunction with the importing
one.
4) Currency controls
6) Antidumping rules
Page 9 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
7) Export financing
8) Free-trade zone
9) Administrative policies
Mark Fitzpatrick
He mentioned that the role of politics in international business has long been
implicitly recognized, but it is only in recent years that academic interest has
focused on this interaction. Typically, international business firms' evaluation and
assessment of host country political environments are not formally organized.
Although most firms see political risk as a serious influence on foreign investment
decisions, in general they do not have a structured management function with
which to assess its impact.
Page 10 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
According to DAHI,
“Political environment is defined as a persistent pattern of human relationship that
involves to a significant extent, control, influence, power or authority.”
They argued that free trade is more likely between political alliances. However
their analysis also suggests that the evolutionary prospects of alliances vary: those
that are the products of bipolar systems are more likely to evolve into free trade
coalitions than are their multipolar counterparts.
Less credible exit threats and clearer responsibilities for alliance stability explain
the advantage of bipolar system.
Page 11 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
a. Quantitative method
We have used quantitative method because it will be easy for all to understand the
extent to which political environment influence international trade. For the purpose
of this study, the method is used ---
Questionnaire Survey
b. Sample size
We have conducted our survey on some students who have knowledge about the
impact of political environment on international trade. They helped us through
giving information about the international business circumstance. They also told us
“What are the effects of political environment on international trade”.
a) Yes b) No
Page 12 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
5. When political conflict occur, do you think the foreign country buyers are
willingly want to trade with us?
a) Yes b) No
a) Yes b) No
c) Both (a & b)
Comment……………………………………………………………………
…………………………………………
Page 13 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
………………………………………………………………………………
………………………………
a) Directly. b) Indirectly
Secondary data.
Primary data:
We have conducted a survey on students to collect data that helps us to prepare the
term paper.
Secondary Data:
The term paper has been completed on the basic of secondary data. The main
sources of secondary data are various books, Internet and so on. After collecting
data from the material, the data was first carefully scrutinized. Then the data was
organized as required. In order to make the study effective and efficient, some
sources including, official websites of commerce ministry as well as concerned
websites of government and its agencies, financial Journalistic have been used.
Page 14 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Ans: For this question, 5 students say political environment directly impact on
the international trade and 5 students say indirectly and rest of the say both
directly and indirectly.
5 Direct
Non direct
Both
25
Ans: Here, 25 students say in international trade there exist political risk, and
5 students say here no political risk.
Page 15 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
00
Yes
No
25
Ans: For this question 7 students say ownership risk, 3 students say
operational risk, 5 students say transfer risk and rest other says all of this risk
is exist in international trade.
Ownership risk
Operational risk
15
Transfer risk
3
Allof this
Page 16 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Ans: 6 students say strike, 4 says Harte, 3 students says beleaguer and 17 students
says all of this conflicts affected to the trade.
6
Strike
Hartal
4 Beleaguer
17
All of this
3
5. When political conflict occur, do you think the foreign country buyers
are willingly wanted to trade with us?
Ans: Most of the students, like 25 say yes and 5 are says no.
00
Yes
No
25
Page 17 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Ans: For this question, 27 say yes and 3 students say no.
00
3
Yes
No
27
Ans: Here, Some like 5 students says positively political environment effect on
the economic environment in international trade in Bangladesh then 10
students says negatively and 15 says both negative and positive
Positively
Negatively
15
Both
10
Page 18 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Ans: 7 students say decrease national income than 8 students says increase
costs of products and 15 students says both (a & b) will be the result if
political environment in Bangladesh affect negatively in the economic
environment in international trade.
8
Increase costs of products
15 Dcrease national income
Both
yes
no
25
Page 19 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
10. Our last question was how negative impacts of political factors
discourage private investment in developing countries.
Ans: 20 students said that political factors directly discourage private
investment in developing countries and 10 students said that political
factors indirectly discourage private investment in developing countries.
Directly
Indirectly
4.2 Findings
1) The political environment in which the firms operate (or plan to operate)
will have a significant impact on a company's international marketing
activities.
2) Changes in government often result in changes in policy and attitudes
towards foreign business.
3) A foreign company operates in a host country at the discretion of the
government concerned, the government can either encourage foreign
activities by offering attractive opportunities for investment and trade, or
discourage its activities by imposing restrictions such as imports quotas, etc.
Page 20 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
Page 21 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
5.2. Recommendation
Page 22 of 23
Impact of Political Environment on International Trade in Bangladesh April 30, 2018
References
Articles:
Websites:
1. http//www.ukessays.com/essays/marketing/the impact of political-
legal-environment-on-business marketing-essay.php (23 March,2015)
2. https://fee.org/articles/politics-and-foreign-trade/
3. https://www.cato.org/publications/commentary/politics-trade
4. http://2012books.lardbucket.org/books/challenges-and-
opportunities-in-international-business/s06-02-political-and-legal-
factors-th.html[Accessed: 15thjuly 2016]
Page 23 of 23